2. WiVi Central Coast Conference and Trade Show Grape Acreage Trends Jeff Bitter Allied Grape Growers March 15, 2016

3. Over the Hump….. Our prediction for 2016 is 16,000 new acres.

4. What’s Hot, What’s Not…. 65% Red 35% White

5. Planting Trends, 2013-2015 2015 2015 Cabernet Sauvignon - 31% Cabernet Sauvignon - 31% Pinot Grigio – 17% Pinot Grigio – 17% Pinot Noir – 15% Pinot Noir – 15% Chardonnay – 13% Chardonnay – 13% 2014 2014 Cabernet Sauvignon - 29% Cabernet Sauvignon - 29% Chardonnay – 17% Chardonnay – 17% Pinot Grigio – 12% Pinot Grigio – 12% Pinot Noir – 12% Pinot Noir – 12% 2013 2013 Cabernet Sauvignon - 29% Cabernet Sauvignon - 29% Chardonnay – 14% Chardonnay – 14% Pinot Noir – 13% Pinot Noir – 13% Zinfandel – 10% Zinfandel – 10%

6. The Changing Five-Year Landscape 2010 vs. Now….. Competition: Wine imports up 15% (114m case average) Craft beer/Cider Demographics/Consumers: Less boomers, more millennials Premiumization Economics: Recession vs. Recovery Strength of US Dollar up 25%

7. This changing landscape affects different regions in different ways… Some positive Some negative

8. Categorical Review Trends, Issues, Threats & Opportunities

9. Breaking it Down…. Value - (<$7/bottle) Interior (excluding Lodi/Delta) Mid - ($7-10/bottle) Lodi/Delta High - ($10-20/bottle) Coastal (standard) Luxury - (>$20/bottle) Coastal (Napa, Sonoma, etc.)

10. Value Category

11. Value Segment (Central/Southern Interior) Trends, Issues, Threats, Opportunities Trends Declining demand/Acreage base revamp Issues Economic sustainability/Competing crops Threats Imports/Water policy Opportunities Differentiate & Premiumize (Quality)

12. Varietal Trends, by Segment….. +25% Note: Change stated cumulatively Annual attrition rates estimated +26% -8% -15% +75% +6% +62% +1% California

13. Mid Category

14. Mid Segment (Lodi and Surrounding Area) Trends, Issues, Threats, Opportunities Trends Improving visibility/recognition Issues Labor, return/cost imbalance Threats Surplus of inexpensive winegrapes in SJV Opportunities Provide value priced grapes for the high category

15. Varietal Trends, by Segment….. +15% +39% -6% +1% +49% +3% +32% +2% Note: Change stated cumulatively Annual attrition rates estimated California

16. High Category

17. High Segment (Coastal – excl. Napa/Sonoma) Trends, Issues, Threats, Opportunities Trends Premiumization lands right in their back yard Issues Pricing pressure – related ability to provide value Threats Competing beverages/producers (both domestic and foreign) vying for same consumer Opportunities Mechanization

18. Varietal Trends, by Segment….. +32% +23% -2% +6% +23% +11% +16% +2% Note: Change stated cumulatively Annual attrition rates estimated California

19. Luxury Category

20. Luxury Segment (Napa, Sonoma, etc.) Trends, Issues, Threats, Opportunities Trends Differentiation Issues Limited opportunity for growth, scarce resources Threats Dependence on economy Opportunities Branding - AVA and associated brands

21. Varietal Trends, by Segment….. +8% -4% 0% +9% +2% +4% +1% Note: Change stated cumulatively Annual attrition rates estimated California

22. Categorical Planting Trends….

23. A consolidated look at the future….

24. Our Production Potential……

25. So what does all this mean? I just want to know if the Central Coast is over or under planted….

26. Wine Shipments

28. Evolving California Acreage Base… Represents only 1.3% total growth annually

29. Final Thoughts/Highlights Premiumization is driving acreage base changes. Premiumization is driving acreage base changes. The momentum of the business appears to be such that we may revert back to a time of adding an appropriate amount of new acres annually. The momentum of the business appears to be such that we may revert back to a time of adding an appropriate amount of new acres annually. The Central Coast is positioned in “the center” of the marketplace, creating opportunities and challenges. The Central Coast is positioned in “the center” of the marketplace, creating opportunities and challenges.

30. Thank you. Come by our booth or visit us at: www.alliedgrapegrowers.org